business news in context, analysis with attitude

by Kevin Coupe

Yesterday, MNB took note of a Financial Times story reporting that Tesco has responded to price increases by Unilever in the UK by "removing Unilever products from its website and warning that some of the items could disappear from shelves if the dispute dragged on." Now, in this case Tesco said the price increases were related to weakening currency in the UK as a result of the Brexit vote, and it said that Unilever was taking inappropriate price increases. (We'll have more on the resolution of this controversy below.)

I commented on this story, writing:

I always sort of admire it when retailers position themselves as being agents for the consumer rather than sales agents for the manufacturer. I just think it is a better place to be ... and if that means occasionally delisting products to make a point to both constituencies, I'm okay with that.

Which prompted MNB reader Kevin Mahon to respond:

If you drew the distinction between a justified price increase and an arbitrary increase, I could respect your position. As stated, it is not respectful to many of your “manufacturer readers.” I am not ok with that.

First of all, no disrespect meant.

Second, I think we probably can agree that a price increase that seems justified to a manufacturer may seem less so to a retailer.

Ideally, when a retailer comes to this conclusion, it is because it is representing what it perceives as the best interests of its customers. (It almost goes without saying that if a retailer stands up for its customers, it will be able to defend and even improve market share. So defending customer interests is not altruistic. Far from it.

This is the larger point that I think needs to be made again and again. And I think it is an Eye-Opener.

Almost two decades ago, Glen Terbeek wrote an excellent book called "The Agentry Agenda: Selling Food in a Frictionless Marketplace," which remains revolutionary in its premise - that retailers can be far more effective and efficient if they serve as agents for the consumer rather than sales representatives for manufacturers.

I have agreed with that premise since the first time I read the book.

(FYI ... "The Agentry Agenda" is out of print, but still, thankfully, available from third-party sellers on Amazon.)

Here's the rub. When the retailer stands up for the customer, the supplier community wins as well. Because it all should begin and end with the shopper, and when retailers and suppliers get away from that core value, that's when they get in trouble.

This is why I have always argued against the entire premise of slotting allowances, saying (and I am not alone in this) that they have a corrupting nature that does not serve the customer. (I've never met a supplier who thinks that statement disrespects them.)

The Tesco-Unilever dispute was very specific. But the broader tensions between retailer and manufacturer ought to be resolved in only one way - on where the true bottom line ought to be, in the consumer's best interests.
KC's View: